HP's WEEE management strategy

Chapter

22

HP’s WEEE management strategy

Marta Jakowczyk1, Daniel Seager1, Kirstie McIntyre2, Klaus Hieronymi3 1

HP, Sant Cugat de Valles, Spain; 2HP, London, United Kingdom; 3HP, Bad Homburg, Germany

CHAPTER OUTLINE

22.1 HP’s circular economy strategy

592

Product reuse and recycling 593 Recycle materials and increase recycled content

22.2 HP experience during 10years of WEEE in Europe

594

595

22.2.1 HP’s strategy in compliance operations 595 22.2.2 WEEE Directive implementation in member states 596 22.2.3 Experience with multiple compliance solutions 597 Experience with monopolies 598

22.2.4 22.2.5 22.2.6 22.2.7

IT infrastructure for compliance management 599 Visible fee 601 Emergence of recycling standards (WEEELabex, CE standard) Maturity of producer responsibility organizations 603

22.3 Challenges with WEEE II and beyond

604

22.3.1 All WEEE flows and EPR 2.0

604

602

The WEEE landscape is changing 606 The principles of EPR 2.0 607 Design for recycling 611 Producer sampling has potential 612 Recognition of manufacturer’s own programs 612 Fluctuating resource prices 612

22.3.2 Marriage made in heaven or marriage from hell? Circular economy and WEEE 613 Leasing businesses explained 614 Repair and refurbishment is necessary 614 Preshipment testing is not feasible for a lessor 614 Role of the leasing industry 615

22.4 Conclusions 615 References 616

Waste Electrical and Electronic Equipment (WEEE) Handbook. https://doi.org/10.1016/B978-0-08-102158-3.00022-7 Copyright © 2019 Elsevier Ltd. All rights reserved.

591

592 CHAPTER 22 HP’s WEEE management strategy

22.1 HP’S CIRCULAR ECONOMY STRATEGY By 2030, there will be 3 billion new technology users globally. Simultaneously, the world faces pressing challenges related to resource availability, climate change, and inequality (UNEP, 2015). As the quantity of electronic products increases, so does the challenge of managing their impacts responsiblydnot only at the end of their life but at every stage of their life cycle from raw materials to design, manufacture, usage, and disposal. Taking a whole life approach to information technology (IT) is vital in managing waste electrical and electronic equipment (WEEE). This is because the decisions made at every stage in the product’s life, such as design and material choice, have an enormous impact on its end of life. HP Inc. (HP) is the world’s largest IT company, delivering 102 personal computers (PCs), 63 printers, and 983 consumables to customers all over the world every minute. HP takes this responsibility seriously, recognizing that no matter how durable or well made, these products will eventually reach the end of their life. HP recognizes that social and environmental responsibility are essential to its business strategy and to the value proposition the company represents to its customers. In order to effectively manage the impacts created by HP’s business operations, HP’s environmental strategy focuses on three core areas (HP, 2017a,b). Decouple business growth from consumption n

n n n

n

Keep materials in use at their highest state of value for as long as possible Develop energy-efficient products that are designed for recyclability Decrease the amount of materials required to make and use products Create new technologies and products that enable customers to reduce their material usage Repurpose products at end of service through repair, reuse, and recycling

Disrupt industry business models n n

n n

Reinvent how solutions are designed and delivered Provide product-based services that help customers easily scale technology solutions while reducing costs and waste Extend product life through design for reparability Increase repair, reuse, and recycling

22.1 HP’s circular economy strategy 593

Digitize supply chains and production n n

n

Transform how entire industries design, make, and distribute products Advance commercial print solutions to support the analog-to-digital shift Progress 3D printing technologies that streamline prototyping and improve the economics of short-run manufacturing

Working with supply chain partners and others, HP is reducing the environmental impact of our products and services at every stage of the value chain. It contributed to HP being scored for corporate social responsibility in The Gartner Supply Chain Top 25 for 2017 (Gartner, 2017). HP invests heavily in research and development to help customers stay ahead of what’s next and enable them to seize new opportunities while advancing their own sustainability priorities. Through industry-leading repair, reuse, and recycling programs, and product-as-a-service business models, HP aims to keep products and materials in circulation for as long as possible, while driving further closed-loop innovations.

Product reuse and recycling The rapid pace of innovation and obsolescence in electronic products is increasing the urgency for a circular economy in which used products and materials are repurposed and kept in use as long as possible. Since the launch of our industry-leading Planet Partners return and recycling program, more than a quarter century ago, HP has driven this transformation in our industry. In 2016, HP had recovered a total of 6.3 million units of hardware products (for reuse and remarketing) and 119,900 tons (for recycling). HP recycled 80% of the toner material that it received, 20% was treated in a waste-toenergy process, 0% went to landfill, and 0% was incinerated. HP’s Planet Partners recycling and reuse program includes: n

n

n

n

free recycling of unwanted computer hardware and printing supplies for HP customers; a trade-in program that gives customers cash back for aging technology (of any brand) to put toward new HP technology; donation for reuse programs that makes IT available to individuals who might otherwise not have access to computer technology; a return-for-cash program where eligible equipment goes on to be refurbished and resold.

594 CHAPTER 22 HP’s WEEE management strategy

HP offers comprehensive take-back programs in 73 countries and territories worldwide through a global network of reuse and recycling vendors. HP commissions third-party audits to monitor vendor conformance with HP’s high standards and ensure that returned items are processed appropriately. To protect customer privacy, HP and its partners follow strict protocols to ensure that returned products complete comprehensive data-cleansing processes. HP’s circular economy strategy also includes working with legislators and governments to inform policy and infrastructure decisions to ensure that regulations and systems are workable and effective.

Recycle materials and increase recycled content HP is both a supplier and user of recovered materials, incorporating increasing amounts of recycled and recyclable content into new HP products. This accelerates the development of recovered materials markets around the world, which is essential to progress toward a circular economy. HP is an industry leader in closed-loop recycling using a variety of plastics recycled from the HP Planet Partners program to manufacture new HP ink and toner cartridges. Through 2016, HP manufactured more than 3.4 billion ink and toner cartridges using more than 88,900 tons of recycled content material. This has kept 735 million cartridges, 70 million apparel hangers, and 3.7 billion postconsumer plastic bottles out of landfills, instead upcycling these materials for continued use. Today, more than 80% of HP ink cartridges contain 45%e70% recycled content, and 100% of HP toner cartridges contain 10%e33% recycled content. In 2016, HP used 9000 tons of recycled plastics in HP toner and ink cartridges (Fig. 22.1).

Recycled plastic used in HP toner and ink cartridges, cumulative tonnes 100,000 80,000 60,000 40,000 20,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Ink

Toner n FIGURE 22.1 Recycled plastic.

22.2 HP experience during 10 years of WEEE in Europe 595

HP also uses recycled content in personal systems and printing products when feasible. In 2016:
47% of new commercial HP desktop products contained greater than 10% postconsumer recycled (PCR) plastic content, up from 33% in 2014.
70% of HP commercial displays contained more than 10% PCR plastics, and 26% contained more than 40% PCR plastics.
HP launched three inkjet printers that contained more than 5% PCR plastics. All models of the PageWide fleet now contain postconsumer recycled content plastic of more than 5% (HP, 2017a,b).

22.2 HP EXPERIENCE DURING 10 YEARS OF WEEE IN EUROPE Producers have a challenging time managing environmental impacts because legislation and implementation systems are completely unsynchronizeddboth within the European Union (EU) and globally. WEEE legislation is particularly varied. Legislation appeared first in European countries and there is now a proliferation of legislation in regions and countries, which include the EU, the United States, Canada, Japan, Mexico, Brazil, and China. Yet, there is a lack of harmonization both within countries and between them. The complex implementation of the WEEE Directive in different regions and the differing or absence of e-waste infrastructure in other regions also make it costly and resource intensive for producers to manage WEEE at a company level. HP has been involved in all stages of the WEEE Directive from the first conception in 1998 to WEEE II implementation in 2014. Our company operates in 26 EU countries and manages 87 contracts with producer responsibility organizations (PROs). We deliver 766 compliance reports annually. This section describes various components of HP’s strategy in compliance operations to demonstrate how much effort and dedication a manufacturer needs to contribute in order to fulfill its obligation.

22.2.1 HP’s strategy in compliance operations Setting out a clear environmental strategy is crucial, but for strategy to become practice, implementation is key. HP has found that different challenges affect different areas of the business. Thus, the most effective way to ensure responsible environmental management across the business is

596 CHAPTER 22 HP’s WEEE management strategy

for it to be integrated. At HP, integration has been promoted by creating environmentally focused job roles and internal goals throughout the business units. However, although the implementation of the environmental strategies is in the hands of all business units, compliance assurance processes are managed centrally across the company. This is necessary to ensure that the requirements of hundreds of national environmental regulations are met. Complying with legal obligations is a matter of collaboration between different environmental teams. They work together to demonstrate to local government authorities that HP takes responsibility not only for the environmental impacts of their products downstream by recycling and proper product disposal but also for their upstream activities inherent in the material selection and in the product design.

22.2.2 WEEE Directive implementation in member states The WEEE Directive has been implemented in each member state, through the transposition of the Directive into national law. Fig. 22.2 depicts the high-level requirements from the producer’s perspective, laid out in the

EU market

Go to market requirements

Consumer B2B

Product WEEE marking User information Reporting Registration Regular declaration of materials placed on the market Finance Guarantees

Take back requirements

Different by country

Different by country

Collection of WEEE Transportation of WEEE Treatment of WEEE

National registry Take back operations (B2B) Different by country

Pick-up of WEEE Transportation of WEEE Treatment of WEEE

Treatment of WEEE

Information Product recycling information

Take back operations (compliance schemes)

Recycling companies n FIGURE 22.2 Producer’s obligations.

Selective treatment of hazardous substances Recycling targets

22.2 HP experience during 10 years of WEEE in Europe 597

WEEE Directive implementation at the member state level. The obligations can be split into two areas: 1. Go-to-market requirements such as registration, reporting, financial guarantees, and product marking. 2. Take-back requirements such as operation of collection and recycling obligations and treatment processes and recovery rates. The requirements for compliance differ considerably country by country. In order to place products on the market, HP must register in the National WEEE Registry in each EU member state, label their products, and make information available to users about proper product disposal. Often the requirements of where this information must be located or how it must be transmitted vary from country to country with considerable ambiguity. Based on real product quantities placed on the national market and product weight information, HP must make periodic declarations to the national authorities of how much it sells in each member state. The format of these declarations varies from country to country and from one PRO to another. HP also makes available to recyclers dismantling guides and recommendations for easy dismantling, depollution, and recovery of WEEE as required by the Directive. When it comes to end-of-life treatment obligations, HP takes responsibility for its products after use. HP organizes take-back and recycling of WEEE with the support of PROs for household customers, while to serve its commercial customers HP set up the Planet Partner Program with recyclers and asset recovery organizations to offer its commercial customers free services. The evidence of material quantities collected and treated is reported to the National Registry to show that HP’s producer obligation has been met.

22.2.3 Experience with multiple compliance solutions HP’s main strategy for complying with the WEEE Directive has been through the emergence of PROs, established to carry out part of the obligations of producers, namely, the collection and treatment of WEEE from private households. Depending on the member state, there are different rules of PROs. In some member states the PROs must be a consortium not for profit (e.g., Italy); in other member states they can be for profit (e.g., UK). Across the 28 EU member states, 6 PROs operate under monopoly regimes for WEEE compliance (i.e., obligated producers have one option only) and 22 member states have competitive markets for producer compliance. Two notable outliers are the United Kingdom (UK) and Germany. At the time of writing, the UK has 36 approved producer PROs by the

598 CHAPTER 22 HP’s WEEE management strategy

Environmental Agency and Germany officially has no PROs, but multiple options for producers looking to outsource their obligations via recyclers or consultancies. As the only country in the EU, Germany implemented, in addition to the “collective compliance,” the option of individual producer responsibility, which limits the responsibility of a producer to its own products. As the rules are complex and implementation quite bureaucratic, this compliance option is not widely used. Compliance to the WEEE obligations at member state level requires individual country contracts with recyclers and compliance organizations to be established. In other words, compliance is a country-by-country affair. This adds complexity to daily compliance operations in HP. Each local sales entity needs to be a member of, most often, three different PROs to fulfill the producer’s obligation of WEEE, batteries, and waste packaging. Having centralized the compliance management in HP, the take-back operations team is in charge of communication with multiple PROs and recyclers. This requires staff dedicated to managing the complexities that are inherent with a multivendor, multicountry compliance program such as frequent changes in reporting requirements, price fluctuation, audits, and data analysis. In addition to reporting obligations, HP must finance the recycling of WEEE in each member state, and also the administration of this obligation varies considerably. PROs established numerous methods of calculating financial obligations based on product volumes declared, e.g., per collected treated volumes or per put-on-the-market volumes from previous month or quarter of the current year or previous 1, 2, or even 3 years. In some countries financial obligation depends also on the market share and number of members in the compliance scheme. Compliance material fees can also fluctuate depending on raw material prices. In addition to the volume-dependent compliance cost, there are annual fees and communication campaigns charges. After submitting end-of-year declarations of volume placed on the market to PROs, a producer often receives a balance report that results in adjustment between the invoices paid during the year and total obligation. The administration complexity of a producer’s compliance costs requires a robust process of invoice coordination and financial forecasting.

Experience with monopolies As briefly touched upon in the previous section, in some member states only a single PRO was established and in others, more than one (competing) PRO. Although there are arguments concerning economies of scale that monopoly PROs use to justify their continued monopolistic state, HP’s experience with monopolistic PRO has been one of perpetually higher costs (compared to PROs in competitive landscapes) and low levels of control

22.2 HP experience during 10 years of WEEE in Europe 599

PRO 1

0.50 €

0.40 € PRO 2

0.30 € PRO 3 PRO 4

0.20 € 0,16

0,16 0,14

0.10 €

0,11

June July Aug Sept Oct Nov Dec Jan n FIGURE 22.3 Take-back cost trend in Austria in 2006.

afforded to the member producers, low flexibility, and low level of customer (producer) service. In 2002, HP, Braun, Sony, and Electrolux established the European Recycling Platform (ERP). The intention behind the establishment of the ERP was to drive a cost-effective implementation of the WEEE Directive and to drive competition within the WEEE compliance marketplace. In countries where competition has been established and where previously a monopoly was present, there have been drastic reductions in costs. Fig. 22.3 shows in Austria the evolution of compliance fees over time as monopoly gave way to competition following the establishment of ERP. A change to the monopoly status quo in the Netherlands with the introduction of a new PRO (WEEE NL) in 2013 resulted in a 30% lowering of compliance fees, and since then year-over-year reductions have been experienced. Meanwhile, collection rates in the country have remained stable or increased (National WEEE Register Netherlands, 2017).

22.2.4 IT infrastructure for compliance management A major part of complying with WEEE requires the correct reporting or product sales in the scope of the Directive. Reporting formats, reporting periodicity, and even scope of reporting vary country to country. For example, if HP sells a product from country A to a distributor in country B, this sale might be excluded from HP’s producer obligation in country B, due to the definition of producer in country B. On the other hand, if HP in country A sells to an end user in country B (by distance communication), this is most likely an HP producer obligation in country B. For another country

600 CHAPTER 22 HP’s WEEE management strategy

C, sales made to a distributor in that country from country A may, contrary to the EU definition of “producer” be an HP obligation. Knowing all the nuances in producer definition and scope of the Directive in each member state is important to ensure that accurate and compliant reporting is made. In order to manage the complexities in reporting, HP has developed specific IT tools that are essential for compliance management. Timely delivery of the reports to local authorities and PROs, which differs across member states, would be impossible to prepare manually considering the extensive product portfolio that includes thousands of products having unique specifications and the varying reporting requirements of each member state. HP has to present the information to the local authorities and PROs often monthly or quarterly, making the beginning of the following month or quarter a period of high workload for the reporting team. A compliance calendar has been defined and implemented to keep track of reporting frequency and delivery timelines. In the back end, HP has developed a web-based tool for data retrieval and report generation that generates reports and allows HP to adjust the parameters, e.g., sales channels or sales entities to report according to legal requirements (Fig. 22.4). While the sales data come from the common system used also by other HP departments, the product information database has been developed specially for the purpose of take-back compliance reporting. The level of details is aligned with all the compliance requirements in all countries. HP established a data validation process for every report to be checked in terms of completeness and consistency before delivering to national authorities. The new reports are compared against the previous ones (on the total

Units sales data (put on market) Legal reporting requirements

Product data (attributes, weight, etc)

Report generation

n FIGURE 22.4 Input information to report generation.

22.2 HP experience during 10 years of WEEE in Europe 601

level as well as category by category) to understand the trend of volumes reported over time and to check alignment between reported volumes of WEEE, packaging, and batteries. Once data quality is validated, report submission takes place. Submission method differs depending on the PRO or national registries and requires manual work every month. Some schemes require data submission using their specific codes, others want it according to Harmonized Tariff Schedule (HTS) codes, and other require it according to the WEEE category codes 1e10. Some report submissions are manual and must be signed by a director representing the HP national entity, and others can be made online. Some online tools used by schemes do not allow automatic data upload and require manual submission, category by category. This means that despite developing IT infrastructure in HP for compliance management, this process is still cumbersome due to limitations of the vendors and environmental authorities to which reports need to be delivered.

22.2.5 Visible fee The visible fee was originally a mechanism established in the original (first) WEEE Directive (2002/96/EC) designed to cover the costs of historic WEEE, i.e., WEEE from EEE placed on the market before the start of the WEEE Directive. It was also considered by some manufacturers to keep to move the cost of take-back directly to the customer and avoid that it becomes subject of competition between the brands. It was initially intended to have a sunset horizon until historic WEEE was flushed out of the system and new WEEE (WEEE from EEE placed on the market since the start of the WEEE Directive) became dominant in the waste stream. The visible fee has always been a contentious topic amongst producers depending on the type and category of WEEE the producer is active in. For HP, the visible fee has not been the preferred finance mechanism to cover costs of collecting and treating WEEE for the following reasons: A visible fee is inappropriate for products that can be recycled for a low cost or at no cost or where the cost of the administration of the fee exceeds the actual cost of recycling. Mandatory use of a visible fee presents producers such as HP with a massive administrative burden. HP has hundreds of thousands of product codes and thousands of new product codes added each month to its portfolio. Managing the visible fees requires constant manual management, matching product type with the associated fee, as well as expensive IT projects to ensure fees are correctly stated on invoices.

602 CHAPTER 22 HP’s WEEE management strategy

At the beginning of the WEEE Directive, several PROs established a visible fee structure that was conservative in relation to the costs expected. Due to mounting public and political pressure, visible fee programs have since been reformed and the size of the contributions reduced. Finally, in most countries the cost of WEEE management has been going down since the onset of the first WEEE Directive. For Information and Communications Technology (ICT) equipment, the cost of WEEE management is often low. For such products where the cost of WEEE management is low, it is not deemed necessary or desirable to have a visible fee considering the administrative costs entailed.

22.2.6 Emergence of recycling standards (WEEELabex, CE standard) HP has been recycling hardware through its planet partner program since 1987 (HP, 2014a), long before the implementation of the WEEE Directive. A key concern for HP in the sourcing and contracting of hardware recyclers has always been the risk that hardware is improperly recycled. The recycling industry, although significantly matured in the last decade, has always been an industry with varying degrees of quality and lagging in regulation and control. Main areas of risk inherent with the recycling process, to list a few, are personal injury whilst handling WEEE, improper depollution leading to leakage of substances to the environment, risk of fire, risk of improper storage or illegal export and dumping of material, and risk of improper handling of customer data held on hardware devices. All these risks ultimately culminate into brand image damage. When HP began its customer recycling programs few common recycling standards existed that HP could require its vendors to follow. Consequently, to address this in 2004, HP developed its own hardware recycling standards (HP, 2014b) together with partners and recycling consultants, and since then has required all its vendors engaged in hardware recycling and/or reuse to follow these standards. HP has built a recycling assurance program around its recycling standards with a third-party global environmental consultancy firm that performs frequent third-party audits on behalf of HP of HP’s recycler vendors. Audits assess vendors’ environmental, health, and safety practices and performance and ensure that there is no “leakage” of materials to facilities outside the approved vendor network. Nonconforming vendors must submit corrective action plans within 30 days and address those items within 90 days. In extreme cases, HP will cease business with vendors that lack sufficient transparency or are unwilling to make the changes that HP requires. Under this

22.2 HP experience during 10 years of WEEE in Europe 603

program, HP audited 43 vendor facilities in 23 countries during 2016. HP has long been committed to the responsible processing of used electronics. During 2017, to promote transparency and progress in the social and environmental standards in the electronics industry supply chain, HP published a detailed list of its global recycling vendor sites (HP, 2017a,b). Since 2004, there has been progressive development of recycling standards developed across several regions. In the United States there are two widely used standards, R2 and e-Stewards. Both standards are accredited by the American National Standards Institute (ANSI) and focus on recyclers, asset manager processors, and refiners. The EU has the WEEELabex standard, developed by a group of PROs known as the WEEEForum. WEEELabex was initially slow in its uptake by EU operators, primarily due to the high cost of certification, but has, since its finalization in 2011, and at the time of writing, been taken up by 139 operators across 13 countries (WEEELabex, 2017). In 2017, the WEEELabex also achieved accreditation status. The EU has also recently finalized a series of WEEE standards developed under an EU commission mandate by the CENELEC body. These standards, largely based on the WEEELabex Standards, have been mandated in national legislation by some of member states such as the Netherlands, Belgium, France, and Ireland. With the emergence of these recycling standards on the market, HP has performed a gap assessment between its recycling standards and the standards such as WEEELabex, R2, and e-Stewards to assess whether we can accept these standards in place of HP’s own standards. HP now accepts thirdparty certifications (such as R2, e-Stewards, and WEEELABEX) in its vendor audit program, counting such certifications toward conformance where the standards are aligned with HP requirements, and conducts supplementary audits to bridge any gaps. This allows HP to focus more resources on working with recyclers in regions that have not yet adopted these standards (such as South Africa and several Asian countries) and work with our vendors in these regions to drive constant improvement with our vendors there.

22.2.7 Maturity of producer responsibility organizations Since the publication and transposition of the WEEE Directive in 2012, comprehensive WEEE collection networks have been built and rolled out across the 28 EU member states. The number of WEEE-specific treatment plants increased, logistic companies and collection points started to create activity dedicated to WEEE, PROs were created, WEEE registers and coordination centers emerged, and supporting businesses such as consultancies and legal advisers specialized in WEEE matters were established.

604 CHAPTER 22 HP’s WEEE management strategy

Some PROs now combine their resources and expertise to provide new compliance solutions to producers, which include the fulfillment of both bureaucratic administrative obligations and the management of operational obligations. Joint forces of PROs resulted in coalitions, e.g., WEEEForum, which has been created to offer EU-wide compliance solutions that help simplify compliance for producers. Similar initiatives have also been taken by companies such as WEEELogic, Reverse Logistics Group, and Landbell Group, which change their focus from compliance operations at the country level to pan-European compliance solutions. These organizations operate as a bridge between the producer and the local authorities, in the same way as national PROs, with the additional advantage that the compliance support services are provided by a central dedicated team of compliance experts to multiple countries. In countries, especially where these organizations do not operate directly or in which monopolistic organizations/schemes are the norm, they have built relationships with local PROs. These organizations specialize in reducing the complexity of extended producer responsibility legislation and have compliance solutions in the heart of their business. They have also developed compliance software and begun offering total compliance management solutions that are designed to take over several elements of compliance activities from producers especially beyond the country border.

22.3 CHALLENGES WITH WEEE II AND BEYOND 22.3.1 All WEEE flows and EPR 2.0 Since the introduction of EPR legislation, there has been an assumption that collection and recycling of waste always costs money. However, due to the inherent value of many materials and the increased efficiencies in the collection and recycling of WEEE, as well as the avoidance of hazardous materials, the revenues derived from the recovered materials for a number of categories in the WEEE stream outweigh the cost of collection, treatment, and management. In several European member states, producers are receiving money for certain categories of WEEE, e.g., in Germany as presented in Table 22.1. At the same time it is clear that for the foreseeable future certain WEEE categories such as lamps, fridges, and cathode-ray tube screens will continue to result in a net cost to producers. With the rising global price of materials commonly found in WEEE, such as copper, steel, aluminum, and certain precious metals such as gold and silver, WEEE is becoming more and more, in net terms, a valuable waste stream. The price of copper, for example, has risen from around V2.200/t in the year 2004 to over V5.000/t today (Expansion Country Economy,

22.3 Challenges with WEEE II and beyond 605

Table 22.1 Recyclers’ prices when WEEE delivered to recycling facility (excluding transport) (EUWID, 2013) Product category

From (V/t)

To (V/t)

Large domestic equipment Cooling equipment Televisions/monitors (cathoderay tube) Mixed IT and CE (without monitors) Small household equipment

180 45 30

150 60 40

230

100

200

80

2018). The picture is similar for other metals (see Fig. 22.5 for gold). Recyclers are increasingly starting to collect and recycle WEEE without any involvement from producers as is presented in Fig. 22.6. Commercial recyclers collect WEEE directly from the business owners of the waste or from collection points such as municipalities and retailers,

Gold / EURO, D, FX_IDC 0 0

O 1116.73 H 1125.25

L 1115.35

Market closed 1250.00

C 1124.92

Vol (20)

1225.00 1198.67 1175.00 1150.00 1125.00 1100.00 1075.00 1050.00 1025.00 1000.00 975.00 950.00 925.00 900.00 875.00 850.00 2014

May

Sep

2015

May

Sep

2016

May

n FIGURE 22.5 Gold price trends for 2014e17 (Goldprice, 2018).

Sep

2017-01-10

606 CHAPTER 22 HP’s WEEE management strategy

Volume of cat. 3 WEEE that municipalities choose to self manage 60% 50% 40% 30% 20% 10% 0% 2006

2007

2008

2009

2010

2011

2012

n FIGURE 22.6 Percentage of collection category 3 WEEE volumes arising at German municipal

collection points, which the municipalities choose to self-manage rather than hand over to producers (EAR Annual Statistics, 2012). Note: The drop in 2010 was a direct result of a fall in commodity prices that occurred in 2009.

and the revenues of the materials pay for the collection and treatment costs and generate profits. In other words, collection of WEEE that is consolidated and ready for pickup makes business sense. This trend was not anticipated when the concept of EPR was developed back in the 1990s and EPR was adopted as the main vehicle for WEEE management in subsequent legislation. The landscape is clearly changing, and the value of WEEE is playing a significant role in its collection and recycling by actors other than producers. This section evaluates the concept of EPR in relation to the changing market dynamics affecting WEEE, looks at the future of WEEE recycling, defines the role of the producers, and makes policy recommendations with a view to paving the road toward EPR 2.0.

The WEEE landscape is changing At this moment the volumes of WEEE collected and recycled by actors outside the WEEE systems set up by producers are often not reflected in the official collection and recycling statistics that member states report to the European Commission as part of their obligations under the Directive. Nevertheless, commercial actors, such as scrap dealers, installers, and often also municipalities and retailers, have a significant impact on the total collection results. Recent studies have documented this trend and shown the impact of these commercial actors what is presented in Table 22.2. For every study, the table shows how much WEEE is generated in the country, how much WEEE is collected by the producer systems, and how much WEEE is collected by commercial actors operating outside the control of producer systems. The last two columns show the total sum of WEEE

22.3 Challenges with WEEE II and beyond 607

Table 22.2 Collection results in Europe standardized to kg per inhabitant

Country DE (Ökopol, 2011) (kg/inh) NL (Huisman et al., 2012) (kg/inh) UK (WRAP, 2011) (kg/inh) IT (Magalini et al., 2012) (kg/inh) BE (United Nations University, 2013) (kg/inh)

WEEE generated

Collected by producer systems

Collected by commercial collectors

Total collection and recycling

Total (% of WEEE generated)

17.1

7.8

6.2

14.0

82.1%

21.0

7.5

>6.6

>14.4

>67%

19.4

7.3

6.9

14.2

73.2%

16.0

4.29

>6.91

>11.2

>69%

22.4

10.5

>5.1

>15.6

>70%

collected by producer systems and commercial actors and the respective total recycling this represents over the amount of WEEE generated. The studies demonstrate that on average one-third of all WEEE generated is collected by producer systems and on average another one-third by commercial collectors. Although the Directive required member states to report all WEEE separately collected, only the volumes collected by producer systems was reported to the EU (Fig. 22.7). Therefore the revised Directive (Article 16.4 of Directive 2012/19/EU) clarifies that all WEEE flows, i.e., volumes collected by producers’ systems as well as all other collected volumes, should in the future be reported by member states.

The principles of EPR 2.0 This new situation where several WEEE streams represent a value and where commercial actors are engaged in collecting and recycling significant volumes of WEEE, raises the important question of how producers should respond to these changes. Should producers or their appointed PROs compete with commercial collectors and recyclers for access to WEEE? How to ensure fair access to the waste? Should there be some specific requirements for an actor to be allowed market access? Under what conditions should producers remain active in the WEEE recycling chain and ultimately what is their role in a future scenario where all WEEE has a value and is collected and recycled by actors other than producers or their PROs?

608 CHAPTER 22 HP’s WEEE management strategy

End user

Waste bin ~10%

Municipalities

Retailers

Installers

Charity orgs.

Scrap dealers

Export ~20% (mainly reuse)

Domestic treatment Producer collection

Private collection Not reported to producer’s WEEE system

Reported in producer’s WEEE system

n FIGURE 22.7 WEEE flows chart.

First of all, under the assumption that commercial recyclers reach the same treatment results and use the same quality standards, competing for access to waste means that the net cost of WEEE recycling for producers (purchasing agents) will increase, while there is likely to be no environmental benefit. Furthermore, PROs who outcompete recyclers’ access to waste beyond market value using producer funds would disrupt the commercial playing field. And finally, the question is also whether PROs, which essentially are collective groupings of producers, that attempt to compete against single commercial recyclers are acceptable from an antitrust point of view. If producers want to compete with recyclers for access to waste, this should be done on an individual level, for instance, by implementing an individual take-back system. In EPR 2.0, producers can continue to fulfill their requirements under EPR legislation while allowing commercial recyclers to be active on the WEEE market if: 1. The quality of WEEE treatment is ensured. A legal framework is in place that ensures that all WEEE collected is recycled against the same

22.3 Challenges with WEEE II and beyond 609

treatment standards, including WEEE that is exported for treatment abroad.1 2. Conformity with the standards and the legal framework is enforced by member states on all WEEE collected and recycled, including those volumes treated by commercial recyclers. 3. All WEEE flows that meet the minimum treatment standards are reported and registered as being recycled so that these volumes are reflected in the total collection and recycling results in any given jurisdiction. Under these three conditions it would not be necessary for producers or their PROs to remain involved in the collection of WEEE insofar as commercial collectors and recyclers wish to manage all volumes independently. It may even be deemed counter efficient for producers and PROs to prevent commercial actors, or to compete with commercial actors for access to WEEE for recycling. Ultimately this practice could artificially inflate the costs of recycling without any environmental benefit. Producers could allow commercial actors access to the WEEE market and still be assured that all WEEE is being properly recycled and monitored. The introduction of the producer responsibility principle with the implementation of the WEEE Directive in 2005 has driven producersdeither by participation in PROs or in individual systemsdto collect as much WEEE as possible, thereby contributing to the achievement of the member states’ collection target. Producers have always strived for maximizing the collection, demonstrating that way the producers’ commitment to deal with WEEE. In some countries, in order to maximize the collection and in order to avoid WEEE streams disappearing in alternative channels, producers have decided to grant subventions to parties performing collection. These subventions covered the logistical effort and use of storing space provided by retailers, municipal collection points, etc. This system has indeed led to a steady increase of the collection rates for the official reporting, but seems now to flatten out as competition with commercial actors becomes more apparent; for some WEEE streams prices offered by such actors equal or even out price subventions granted by producers. Although this subvention system has proven to be effective today, this initiative can be seen as a

1 Producers and PROs have collaborated with other stakeholders on such treatment standards and today several high-quality standards exist, such as WEEELABEX, R2, and e-Stewards, all three of them recognized by EPEAT, a global rating system for greener electronics. Producers support the European Commission’s mandate to CENELEC to develop harmonized European standards, based on the WEEELABEX standards, as a means to demonstrate and assure proper treatment of WEEE.

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voluntary contribution of producers to increase the official reporting of collection rates for the national authorities. With the introduction of the “all flows concept,” the collection and treatment of WEEE will be driven by market forces; anybody handling WEEE should have the obligation to register and report quantities as well as ultimate recycling and recovery rates. In this system, there would no longer be any need for producers to grant subventions to any party performing collection efforts, as all collected WEEE, whatever legal channel it ends up in, will be reported to the responsible authorities. Some commercial recyclers may still be less interested in collecting and recycling WEEE without involvement of producers. Proper depollution and treatment of hazardous materials is costly, and requiring all recyclers to meet these requirements may mean that some WEEE streams are no longer interesting for commercial recyclers and these volumes would thus fall back to producers or their PROs. Should this scenario materialize, the overall treatment quality of WEEE recycling will increase. However, it has to be noted that many commercial recyclers already meet high-quality standards like WEEELABEX, R2, and e-Stewards. At the same time, allowing commercial recyclers to handle WEEE doesn’t excuse producers from all their responsibilities under the EPR principle; it only means that producers and PROs do not need to compete with commercial actors for access to valuable WEEE. The producers and PROs would still need to ensure that all separately collected WEEE arising at the collection points and that is not commercially interesting to collect by commercial recyclers is still collected and undergoes proper recycling. In such circumstances, it is important that whole WEEE items not deemed commercially interesting by commercial actors are handled and managed by producers rather than only the material fractions within those WEEE items not deemed commercially interesting being handed over to producers. Producers and their appointed PROs would act as dynamic2 safety nets to capture all WEEE that is not collected and recycled by commercial parties. In this new paradigm, the role of the producer is to ensure, together with other stakeholders like authorities, that waste is treated in compliance with standards and a proper collection infrastructure is available. This would be a fundamental change in how producers fulfill their responsibilities under EPR legislation; the principles could be referred to as

2

Dynamic refers to the fact that the safety net will capture more or fewer WEEE streams over time depending on the evolution of the resource market.

22.3 Challenges with WEEE II and beyond 611

“EPR 2.0.” Extended Producer Responsibility 2.0 is an environmental protection strategy to reach an environmental objective of a decreased total environmental impact from a product, by making the manufacturer of the product responsible for the entire life cycle of the product and especially for the take-back, recycling, and final disposal of the product if those tasks are not already executed by other actors, under the condition that these actors meet the same minimum treatment standards as producers and all recycled waste gets reported to the relevant government bodies.

Design for recycling The concept of EPR as developed by Thomas Lindhqvist has a strong link to the design of the product. By making producers responsible for the cost of recycling, there should be an incentive to design products that are easier to recycle. As the cost of recycling has gone down over the last years to a point where many products generate positive revenue, the link to design has become less obvious. Furthermore, in recycling systems where producers still face a net cost, these net costs are often caused by logistics that have no direct link to the design of products. If commercial actors collect and recycle WEEE, the incentive for design for recycling will arguably decrease even more. However, as WEEE becomes valuable more producers will consider collecting and recycling their own products in an individual takeback system (possibly in addition to membership of a PRO), a trend that is noticeable in professional products. In these individual systems the feedback loop to the design of a product is stronger than ever before in PROs. The same could also be considered true when producers are acting as a safety net for noncommercially interesting products or WEEE streams. Only those products that result in a net cost are financed by producers under the safety net model. Often the very reason these products are still not commercially interesting to collect and recycle is related to the required depollution steps that swing the profit/cost balance into the negative. Such a system could arguably be seen to offer a stronger feedback loop to the design of a product than in a system where producers are required to collect all WEEE valuable and costly. Producers may be more directly incentivized to design out features of products that lead them to fall within the safety nets of producers.

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Producer sampling has potential Product categories could also be refined to include sampling the amounts of a specific producer in each waste stream. This would reward responsible producers who design for reliability and durability, as HP’s research has shown that the amount of HP products that appear in the WEEE stream is much lower than HP’s market share. This is because customers use HP products longer, and HP products are more likely to be reused, which also keeps them out of the waste stream for longer. This means HP products typically appear in the waste stream after 10 years.

Recognition of manufacturer’s own programs Another important next step would be to allow manufacturers to reconcile what they collect internally with their legislative target. This would reward producers for their achievements in recovering WEEE directly from their customers, and allow a greater budget for implementing effective takeback and cash-back programs.

Fluctuating resource prices Resource prices are driven by demand and supply and are by definition unstable. Although recent years have shown an upward trend in resource prices, which is expected to continue, there is no guarantee that prices will remain at current levels or will further increase. If a situation occurs that resource price will decrease, this will have a direct impact on the profitability of recycling and this may lead to a reverse trend where commercial recyclers decide to collect less WEEE, which means more WEEE will need to be collected by producers. Producers need to ensure that the collection and recycling systems set up by them are flexible enough to deal with these fluctuations in price. In order to be ready for such fluctuations, producers may decide to always keep a minimum collection network in place that can be scaled up quickly in case resource prices decrease and volumes of WEEE increase. In EPR 2.0, producers ensure that they will always be able to collect and recycle WEEE that is handed over to them; situations where the collection system set up by producers cannot deal with the sudden increase of WEEE will be avoided at all cost. This may mean that even in a situation where all WEEE can be recycled for a profit, producers may decide to keep a collection network in place to collect some volumes of profitable WEEE that can be scaled up quickly in the event of fluctuating resource prices.

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22.3.2 Marriage made in heaven or marriage from hell? Circular economy and WEEE The transformation from a linear economy (make-use-dispose) to a circular system requires policy measures to foster transnational resource efficiency without adding complexity of regional waste legislations. Policy makers have perhaps focused too much on preventing waste dumping that they may have inadvertently hindered initiatives to capture residual value from used products. The implementation of the forthcoming WEEE Directive recast raises concerns that it may hamper producers’ ability to move (export/import) all necessary used electrical and electronic equipment (UEEE) into countries where centralized repair lines are located and make the repair/refurbishment operation nonviable. Similar measures may be also adopted by the Basel Convention amplifying this impact to the global level. HP utilizes a series of repair hubs. A repair hub receives defective HP products from all around Europe and beyond to perform diagnosis and repair operations. After repair, the products are sent back to customers or local exchange pools. High-value spare parts (e.g., motherboards) are sent for refurbishment to the production facilities (e.g., in China) as in-depth product knowledge is required to ensure the same quality and reliability as of new spare parts. It is essential for the viability of this centralized repair operation that original equipment manufacturers (OEMs) are able to continue the process of shipping UEEE to the repair facility to keep repair cost at a level that is acceptable to customers. Directive 2012/19/EU on the WEEE has established new requirements for the shipments of UEEE. Annex VI of this Directive requires that all Used EEE shipped across borders is fully functional and tested as such; otherwise it must be shipped as waste. There are two exceptions for warranty products and professional products, however, these exceptions are unclear and, consequently, not sufficient. The two exceptions under annex VI of Directive (2012)/19/EU, if not properly defined, would lead to a situation where a significant amount of shipments would be not considered exempted and would need to be shipped as waste. This would effectively render the operation noneconomically viable, leading perversely to the premature generation of waste. Furthermore, in light of circular economy, leasing models prompt OEMs to design sustainable products not through force or regulations but through economic incentives. When consumers lease instead of purchase, companies need to consider not only what happens at the moment a product is sold but also what happens during use and maintenance and when it

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comes back and have the ability to move it to centralized refurbishment facilities. However, a leasing business has little in common with more general collection and recycling activities.

Leasing businesses explained The most significant point of difference is that lessors assume residual value in the equipment they lease. Consequently, the lessor does not recover its full investment in the leased equipment from the rental proceeds of the initial lease. If the lessee chooses to return the leased equipment upon expiration of the lease, the lessor will only be able to recover its residual investment through reselling or re-leasing the equipment. A lessor’s ability to get the asset back to refurbish, resell, and remarket equipment is therefore critical. The lessor will be required to write off its residual investment and would incur significant losses if it is not able to do so. Additionally, as part of ancillary “new-for-old” and other take-back schemes, lessors often purchase a customer’s used IT equipment with a view to refurbishing, repairing, and remarketing that equipment. Lastly, it is noted that leasing contracts always require lessees to maintain equipment in good working order and to replace any damaged equipment with functional equipment.

Repair and refurbishment is necessary Lessors must refurbish and, if necessary, repair equipment prior to resale or re-lease. The refurbishment/repair process is an essential element in any access over ownership program. At a minimum, the lessor will test for functionality and ensure data has been removed from the machine. It is also noted that effective repair/refurbishment facilities must contain wellmaintained testing equipment and other refurbishment apparatus and must be administered by highly skilled technicians. It is not economically practical for a lessor to establish centers conforming to these standards in every country in which it conducts business. Consequently, most leasing operations make use of regional repair centers. The current regional approach allows for the scaling up of facilities and investment in the capital equipment and trained employees necessary for the effective and responsible operation of reuse programs.

Preshipment testing is not feasible for a lessor As noted earlier, it is not economically feasible for a lessor to establish an effective and responsible reuse facility in every country in which it conducts business. As such, if transboundary shipments of UEEE may not be

22.4 Conclusions 615

permitted, the only other option would be to test equipment on a customer’s premises or establish testing operation in every country. However, given the substantial size of lessors’ asset portfolios, this is not economically or administratively feasible. It would be very costly for the lessor. As importantly, this approach would be unacceptable to customers. The process would be extremely disruptive to any customer. It would require the customer to make business critical systems available for testing prior to return and also raises significant business continuity, occupational health and safety, liability, confidentiality and data privacy issues. Consequently, requiring lessors to test equipment prior to shipment will significantly increase the risk that large volumes of valuable, postlease equipment will be prematurely diverted to recycling or disposal rather than managed for continued use.

Role of the leasing industry The leasing industry plays a critical role in enabling businesses, governments, consumers, and other organizations to obtain and use EEE economically and in an environmentally responsible fashion. It is imperative for lessors to be able to move equipment quickly to its repair/refurbishment centers. If they are unable to do so, there is a significant risk that large volumes of valuable equipment will be prematurely diverted to recycling or disposal rather than managed for continued use. The consequential social and environmental results would be overwhelmingly negative. The negative economic impact on leasing businesses and the information technology sector (which relies heavily on leasing activity) would also be significant. Under Annex VI of the WEEE recast there is very limited scope to continue shipments of end-of-lease EEE and asset management volumes. Policy makers seek to prevent used and obsolete electronics being mishandled, in particular consumer products. However, introducing inordinately broad waste classifications will not achieve this objective. Instead, these actions may shut down legitimate operations while illicit actors continue their practices. This runs counter to every tenet of sustainable development.

22.4 CONCLUSIONS The rapid pace of innovation and obsolescence in electronic products is increasing the urgency for a circular economy in which used products and materials are repurposed and kept in use as long as possible. Since the launch of HP’s industry-leading Planet Partners return and recycling program, more than a quarter century ago, the company has driven this transformation in the industry, reflected in print supplies closed-loop

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recycling programs; use of recycled content in hardware; product-as-aservice offerings such as HP Managed Print Services (HP Managed Print Services), HP Instant Ink (HP Instant Ink), and HP Device as a Service (HP Device as a Service); innovative packaging designs; and HP product repair, reuse, and recycling (HP product repair) options. Connecting circular economy strategy to resource efficiency is critical to business success, so HP designs its products and services following the principles of energy efficiency, materials innovation, and design for recyclability. HP promotes regulatory frameworks that support efforts to extend products’ lives through repair and reuse. Transitioning purchasing from a transactional model to a service model will tighten the linkage between product design and value recovery at end of service. HP also encourages responsible legislation on collection and recycling of used electronics that takes into account shared responsibilities, measurement of waste flows, workable flow systems, harmonized recycling standards, and fair allocation of obligations. HP does not allow the export of electronic waste from developed to developing countries, and engages with governments worldwide to help improve national and international legislation governing the movement of electronic waste, such as the Basel Convention on the Control of Transboundary Movements of Hazardous Waste and Their Disposal. HP strongly supports the updated language in the Technical Guidelines that recognizes the appropriate movement of nonworking products between countries to allow for proper repair or responsible recycling. Through industry-leading repair, reuse, and recycling programs, and product-as-a-service business models, HP aims to keep products and materials in circulation for as long as possible, while driving further closed-loop innovations.

REFERENCES EAR Annual Statistics, 2012. Elektro-altgeräte Register, Germany. EUWID, 2013. Overview of the German recycler market. EUWID Recycling and Waste Management Issue 1/2013. Expansion Country Economy, 2018. Copper Price Trend. Available at: https://countryeconomy. com/raw-materials/copper. Gartner, 2017. Gartner Announces Rankings of the 2017 Supply Chain Top 25. Available at: https://www.gartner.com/newsroom/id/3728919. Goldprice, 2018. Gold Price Europe. Available at: https://goldprice.org/gold-price-euros. HP Device as a Service. Available at: http://www8.hp.com/us/en/services/daas.html. HP Instant Ink. Available at: https://instantink.hpconnected.com/us/en/r. HP Managed Print Services. Available at: http://www8.hp.com/us/en/solutions/printservices/services.html. HP Product Repair, Reuse, and Recycling. Available at: http://www8.hp.com/us/en/hpinformation/environment/product-recycling.html.

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